Tax year end strategies to maximise allowances

Mark McKenzie

Mark McKenzie

Chartered Financial Planner

04 March 2022

Following on from our article on ways to plan for the upcoming tax year, below are some further ideas explained in more detail.

Capital Gains Tax and ISAs

Some people employ the strategy of annually selling existing investments assets that are subject to Capital Gains Tax (CGT) and use the proceeds to fund their annual ISA contributions, which are limited to £20,000 maximum per tax year. But why stop at just selling down £20,000? Depending upon your circumstances, it might make sense to sell more to fully utilise your capital gains tax allowance and help to fully or partially fund the following tax years ISA allowance.

Take for example someone selling £40,000 from their investments resulting in a capital gain of £12,000. This gain is within the annual Capital gain tax allowance and therefore no CGT is payable on the proceeds. £20,000 can be used to fund the 2021/2022 ISA allowance and after April 6 a further £20,000 will be used to fund the 2022/2023 ISA allowance.

Personal Allowance and Pension contributions

Your annual Personal Allowance is reduced by £1 for every £2 that your adjusted net income (total income from all sources) is above £100,000. This means your personal allowance is reduced to zero if your income is £125,140 or above. There are ways to mitigate against this situation arising so if your income for the year will be over £100,000 for the tax year it is important to consider your options and try to protect your allowance. 

One potential strategy is to consider whether making further personal pension contributions is possible. But a personal pension contribution can bring your income back down below the £100,000 thus regaining your full personal allowance and benefiting from pension tax relief.

Tapered Annual Allowance

In the 2020/21 tax year the tapered annual allowance rules were amended and the income thresholds were increased. For those with earnings above £240,000, the normal annual allowance of £40,000 is reduced. At earnings of £314,000 or more, the maximum that can be paid into pensions is reduced to just £4,000. Beware however, as the threshold for those who are tested actually starts at £200,000.

This limit applies to employer and employee contributions to pensions.

Contact us

Should you find yourself affected by the tapered annual allowance rules, a personal pension contribution might be beneficial. More information can be found in our blog, here.

For more information, please don't hesitate to get in touch with myself, your financial planner, or a member of our Wealth team, who would be more than happy to discuss your options with you.


Disclaimer: Tax reliefs and allowances are those that apply at January 2022 and are subject to change in the future. The benefit of these to an individual are dependent upon your personal circumstances.

All statements concerning the tax treatment of products and their benefits are based upon our understanding of current tax law and HMRC practices.  Legislation and the levels and basis of reliefs from taxation are subject to change and are dependent on your individual circumstances.

The Financial Conduct Authority does not regulate tax and estate planning.

This article if for information purposes only and should not be construed as an individual recommendation.

While all possible care is taken in the completion of this blog, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained herein can be accepted by this firm.

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